Investing in Financial History Newsletter

This is a free newsletter that explains current events by relating them to similar events in the past. On average, the newsletter is published every two weeks but varies based on the nature of current events. Please click the "subscribe" button below and provide your email address to receive this newsletter. A few recent issues are provided below.

The Siren Song of a Soft Landing is Getting Louder

Investing in Financial History – October 31, 2023
This issue reveals the danger should the Federal Reserve abandon its restrictive monetary policy prematurely. Using the story of the Sirens from the epic poem, The Odyssey, the newsletter also warns that at least one Fed president appears to be listening to the Siren song of a soft landing.

The Phantom Menace: Inflated Expectations

Investing in Financial History – September 26, 2023
This issue discusses the uncomfortable, but critically important, issue of the unsustainability of U.S. fiscal deficits and the growing burden of the nation's debt. It traces the shift in Americans' attitude regarding the use of debt in the aftermath of World War II, and explains why Americans subsequently abandoned the Hamiltonian principle of fiscal surpluses during periods of economic tranquility.

July 28, 1914 - This Day in Financial History and the Lessons of World War I

Investing in Financial History – July 28, 2023
This issue explains how financial history can be used to gain a better grip on the consequences of major financial events. It identifies the similarities between the onset of World War I on July 28, 1914 and the escalation of the COVID-19 pandemic in March 2020.

Financial Lessons from the Eruption of Mt. Tambora

Investing in Financial History – July 11, 2023
This issue explains how the eruption of Mt. Tambora in 1815 contributed to the America's first real estate bubble and great depression level event. It also explains how emissions of sulfur dioxide could provide humanity time to reduce fossil fuel usage and stop the warming of the climate.

Asset Bubble Red Flags and the Rise of AI

Investing in Financial History – June 13, 2023
This issue evaluates the flow of capital into AI investments and compares it to prior speculative cycles. Similar to many technological innovations in the past, company claims of generating profits from AI advancements are likely exceed actual profits. Therefore, the newsletter cautions investor to be wary.

ChatGPT's Limited Knowledge of Financial History

Investing in Financial History – April 20, 2023
This issue revises the "Top Ten Investors in History," provided by ChatGPT. Although ChatGPT's performance was not horrible, it included four undeserving individuals and excluded four worthy ones. This included Hetty Green, who is the woman who I argue is the best investor in U.S. history.

Why Monetary Tightening is Both Necessary and Frightening

Investing in Financial History – April 12, 2023
Explains why the Federal Reserve must maintain a contractionary monetary policy until inflation is decisively contained. This will require economic pain, but it is essential for long-term economic prosperity.

A Fine Line Between Depression and Inflation

Investing in Financial History – March 22, 2023
The run on the Silicon Valley Bank revealed the delicate balance that the Federal Reserve must manage to prevent financial shocks from triggering a deep recession, while simultaneously maintaining a contractionary monetary policy to extinguish inflation.

Published Research

The articles and links provided include a selection of recent research papers, speeches, and podcasts that address a variety of topics, such as monetary policy, the debt ceiling debate, principles of central banking, cryptocurrency, and post-COVID-19 inflation.

Investment Insights:

A Whale of Tale: The History of Venture Investing in the United States

Financial History Magazine – Fall 2023
This featured article recounts more than 200 years of venture investing in the United States. It begins in the early 1800s with the perilous whaling voyages departing from New Bedford, and it ends with the overcrowding of institutional investors in Silicon Valley-based venture capital funds. The article serves as a cautionary tale by revealing the slow-motion asset bubbles that commonly occur within alternative asset classes.

The 10 Greatest US Investors and the Virtues that Made Them

CFA Enterprising Investor – March 31, 2023
This article was prompted by a question posed to ChatGPT by Andrew Mitchell of Ophir Asset Management. Andrew asked the app who were the best 10 investors in history. The article revises this list and explains the rationale for the changes. It also links each investor to 10 critical virtues shared by the best investors.

The Active Management Delusion: Respect the Wisdom of the Crowd

CFA Enterprising Investor – March 31, 2023
Explains the principle of the “wisdom of crowds” and why it makes active management of portfolios unlikely to outperform low-cost index funds. It also explains why the investment advisory profession promotes the use of excessive portfolio complexity and heavy use of active management despite the low probability of success.

The Story of Hetty Green: America’s First Value Investor and Financial Grandmaster

Financial History Magazine – Winter 2023
Explains the history of central banking in the United States beginning with the establishment of the First Bank of the United States by Alexander Hamilton in 1790. Explains how the U.S. gradually established the four key capabilities of a central bank, which include currency stability, bank regulation, lender-of-last resort powers, and monetary policy.

The Six Stages of Asset Bubbles: The Crypto Crash

CFA Enterprising Investor – December 21, 2022
Reviews the six stages that typically define the rise and fall of an asset bubble. It also reveals how the rise and fall of the bubble in cryptocurrency fits neatly in this model. Finally, it outlines four tips that may help investors to resist the temptation to partake in the next bubble.

U.S. Public Debt:

The Debt Ceiling: A Nation Divided and Indebted Cannot Stand

CFA Enterprising Investor – January 20, 2023
Discusses the extreme danger of risking the creditworthiness of the United States in a debt ceiling standoff, but also explains the unsustainability of U.S. federal budget deficits.

Central Banking:

A History of Central Banking in the United States

The Alchemist’s Paradox, Central Bank Sovereignty, and the Fate of Crypto

CFA Enterprising Investor – November 17, 2022
Explains the formidable hurdles that cryptocurrency and decentralized banking must clear to exit the murky world of shadow banking and enter the mainstream. Although history proves that it is unwise to ever say never, it seems highly unlikely that these hurdles will be cleared.

Covid-19 & Inflation:

Strong or Volcker? The Fed and Global Financial Stability

CFA Enterprising Investor – October 21, 2022
Explains the effects of the monetary policy in the United States using the historical examples of Paul Volcker (1979-1982) and Benjamin Strong (1925-1929) as examples. The article argues that the Federal Reserve’s policies are more likely resemble those of Volcker rather than Strong.

The Inflation Game: War, Peace, and the Perils of Central Banking

CFA Enterprising Investor – September 22, 2022
Explains why monetary policies enacted during periods of high inflation are likely to trigger a recession and brief period of deflation. The article argues that the monetary response of the Federal Reserve in 2022-2023 is highly likely to trigger a recession before price stability returns.

The Fed Isn’t Bluffing: The Real Threat of an Upside-Down Depression

CFA Enterprising Investor – June 22, 2022 (originally published on February 5, 2022)
Explains why the Federal Reserve cannot afford to allow inflation to persist and why they will continue tightening policy until price stability returns. It explains the causes of the Great Inflation of 1965-1982, and why the Federal Reserve leadership will not repeat them.

A Post-Covid Recovery is Unlikely to Resemble the Roaring 20s; the Years 1919 and 1999 Serve as More Insightful Comparisons

Social Sciences Research Network – May 2, 2021
Explains the similarities between the COVID-19 financial crisis and past crises, such as the onset of World War I in July 1914, the post-World War I/Great Influenza pandemic in 1919-1920, and the Dot-com bubble in 1999. The paper argues that speculation is likely to resemble the Dot-com era, while the burst of spending is likely to resemble 1919-1920.

Speeches and Podcasts

Using Financial History to Improve Your Investment Decisions - April 3, 2024

Location: Portland, OR (TBD)

Investing is a game of repetition, yet most investors fail to see the repetitions because comparable events are often separated by many decades. The only reliable remedy is to study financial history and manually extend one’s memory of the past. This presentation, which will be hosted by the CFA Society of Portland, will discuss several critical lessons from financial history that remain just as applicable today as they were in the distant past. Examples include post-pandemic inflationary pressures, Federal Reserve monetary policy in 2024, and economic expectations in the aftermath of the COVID-19 Inflation.

Money Tree: Investing in U.S. Financial History - November 3, 2023

Kirk Chisholm and I discussed a number of important topics that can be understood in greater context by studying financial history. Issues include the Post-COVID-19 inflation in comparison to the Post-World War I/Great Influenza inflation, the unsustainability of U.S. fiscal deficits, and the most likely course of the Federal Reserve's monetary tightening campaign.

The Enlightened Investor, LLC